Uses of a Bond to Pay off a Mortgage

by Travis Ames

Selling or issuing a bond can help you pay down your mortgage.

As a young couple with a mortgage on your home or business, it’s always a good idea to know of every option available to help pay it off. If you have a government or corporate-issued bond, you can use it to pay off your home or rental property as well as any facility you may own for your company. There are several ways to take advantage of your bond that can both help you pay down your mortgage and reap the benefits of your bond’s maturity.

Invest in Bonds to Pay Off Your Mortgage

Once you and your spouse decide to get rid of that pesky mortgage, you may think that paying a bit extra to the bank will help cut that mortgage down. While this is true, if you take that extra cash and put it towards a bond with a decent interest rate, you could see returns in a few years that might allow you to pay out your mortgage interest in one lump sum. This is a high-risk maneuver that can be immensely beneficial to your financial health as a couple.

Use Your Bond's Interest

As a bond heads for maturity, it generates interest that can be used towards your mortgage. Both business and government-issued bonds pay interest at a rate that is pre-determined until they reach maturity. It’s a great way for you and your partner to receive extra cash to spend as you want.

Selling Your Bonds

Of course, if you choose to hold onto your bond, it will earn interest and maintain its principal value. This looks great for those looking to invest in bonds. You can sell your bond for cash or trade it for other bonds. It’s a great way to get cash in your hand for you to pay down your mortgage. You and your partner can also use it for a down payment on your dream home, which will in turn keep your mortgage rates low.

Issuing Bonds

In the event that you and your mate have taken the plunge and started your own business, you can make money to pay off the mortgage by issuing bonds. Companies often issue bonds to pay for improvements. While this is a great way to pay your lenders, your obligation will switch from the bank to your bondholders.

Pay Attention to the Interest Rate When Issuing Bonds

While you navigate the waters of issuing bonds, understand that it is similar to a mortgage in the manner that both are loans. A bond with a higher interest rate should not be used to pay a low rate mortgage. This will ultimately harm your business. If your bond’s interest rate is lower than your mortgage rate, then it may be a great idea to take this route.

About the Author

Travis Ames has written for numerous publications since 2007 and has been writing instructional articles online since 2010. His areas of expertise are wide and include travel, politics, arts and entertainment, technology and finance. He currently lives in Portland, Oregon where he will begin teaching in the fall of 2011.